TaxTMI 
TaxTMI 
2019 (2) TMI 1165
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....ting Mills Pvt. Ltd. are directed to pay the differential amount of Rs. 40,918/- forthwith. (2) Out of the demand of Rs. 4,87,041/- raised vide No.V.Adj/Vikh.Dn./CR-05/UKM/CR-5/04 dated 03.08.2004 (for July to August, 2003), the amount of Rs. 2,55,415/- is confirmed on the basis of the working as discussed hereinabove and the amount of Rs. 1,27,251/- debited by M/s. Universal Knitting Mills Pvt. Ltd. against the said demand on 06.12.2007 is ordered to be appropriated against the same. M/s. Universal Knitting Mills Pvt. Ltd. are directed to pay the differential amount of Rs. 1,28,164/- forthwith. (3) Out of the demand of Rs. 1,65,164/- raised vide No.V.Adj/Vikh.Dn./CR-08/04 dated 06.10.2004 (for September, 2003), the amount of Rs. 82,449/- is confirmed on the basis of the working as discussed hereinabove and the amount of Rs. 61,884/- debited by M/s. Universal Knitting Mills Pvt. Ltd. against the said demand on 06.12.2007 is ordered to be appropriated against the same. M/s. Universal Knitting Mills Pvt. Ltd. are directed to pay the differential amount of Rs. 20,565/- forthwith. (4) Out of the demand of Rs. 2,45,615/- raised vide No.V.Adj/Vikh.Dn./CR-02/UKM/CR-10/04 dated 02....
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....as observed that that they were clearing the processed fabric on payment of Central Excise duty, without including the shrinkage factor @ 4.2% while determining the assessable value of processed fabric at the time of clearance. 2.2 Accordingly Seven Show Cause Notices have been issued to them as detailed in table 1, for demanding the duty so short paid. Sr. No. Show Cause Notice No. and date Amount involved (BED + AED) (in Rs.) Period covered 1 V.Adj/Vikh.Dn./R-02/UKM/CR-2/04 dated 07.05.2004 3,60,112/- April to June 2003 2 V.Adj/Vikh.Dn./R-02/UKM/CR-5/04 dated 03.08.2004 4,85,041/- July to August 2003 3 V.Adj/Vikh.Dn./R-02/UKM/CR-8/04 dated 06.10.2004 1,65,164/- September 2003 4 V.Adj/Vikh.Dn./R-02/UKM/CR-10/04 dated 02.11.2004 2,45,615/- October to November 2003 5 V.Adj/Vikh.Dn./R-02/UKM/CR-17/04 dated 04.01.2005 2,85,148/- December 2003 to January 2004 6 V.Adj/Vikh.Dn./R-02/UKM/CR-19/04 dated 07.03.2005 2,98,611/- February to March 2004 7 V.Adj/Vikh.Dn./R-02/UKM/CR-2/04 dated 04.05.2004 2,70,470/- April 2004 to 07.07.2004 2.3 These show cause notices were adjudicated by the a....
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....ice, because show cause notice was for adding 4.2% towards the shrinkage allowance for determining the assessable value, whereas adjudicating authority has confirmed the demand by adding the actual shrinkage which is in excess of 4.2% for determining the assessable value. Since the adjudication order has travelled beyond the scope of show cause notice it is bad in law. 4.1 We have heard Shri Prakash Shah Counsel for the Appellant and Shri K B Kulgod, Assistant Commissioner (Authorized Representative) for the revenue. 4.2 Learned Counsel arguing for the appellant submitted that issue involved in the matter is with regards to the addition of notional figure of 4.2% toward the shrinkage allowance for determining the assessable value of the processed fabric. He submitted that since the value has been determined taking into account the quantum and value of the grey fabric as received, they shrinkage factor has already been included in the value of processed fabric. He showed the Annexure B to Show Cause notice dated 3rd August 2004, wherein in column 'b' the quantity of grey fabric received lot wise has been indicated. Further in column 'c' an addition of 4.2% has been made to the....
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....y wrong. As per Trade Notice shrinkage element is to be added in the value @ 4.2% while calculating assessable value of processed fabrics. Accordingly, the impugned demand cannot be sustained and has to be remanded to the original authority for re-adjudication of the demand. The impugned order is accordingly set aside. Appropriate orders regarding penalty shall also be passed after determination of the duty short paid." 5.2 5.4 In para 11 an 12, Adjudicating Authority records as follows: "11. Since, the Order in Appeal passed by the Commissioner (Appeals) has been accepted by the Commissioner of Central Excise Mumbai II on 16.11.2007 as is evident from the letter under F No V (Universal) Trb- 33/Appl.Commr/07-08/Vikh/837 dated received from rthe Supdt C Ex (tribunal), Mumbai II on 16.11.2007, I accept the orders and directions of the Commissioner (Appeals) and accordingly, I find that the addition of the shrinkage factor in the assessable value of the processed fabrics declared by the noticee is to be done as per the Trade Notice No 14/CEX/Textile (1)/03 Dated 31.03.2003 issued by the Commissioner of Central Excise, Mumbai-II in this regard. 12. As per para (1) of the abov....
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....rade notice. 5.5 If the scheme as laid down by the trade Notice No 65/2002 read with Trade Notice No 46/2002 is read in proper perspective then we will conclude that scheme of valuation as per the said two trade notices and trade notice of 31.03.2003 are identical. Before the matter is taken up for further discussion it is necessary to have a look at the manner of calculation of demand in the show cause notice. The manner in which show cause notice had proceeded to determine the differential duty has been held to erroneous by the Commissioner (Appeal) while remanding the matter back to jurisdictional Assistant Commissioner. Annexure A and first page of Annexure B (running into 28 pages) to Show Cause Notice dated 3rd August 2004 are reproduced below: 5.6 From the above it is quite evident that the demand has been made on the basis of the Trade Notice No 46/2002 dated 18.11.2002. The said trade notice is reproduced below - 5.7 From the perusal of the said trade notice, specifically, the illustration in para 7, it is quite evident that what is being clarified and determined there in is the assessable value of processed fabric. If that be so the assessable value, so determine....
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....f the Supreme Court as quoted above would make it clear that the selling price as declared by the trader would include only the price or deemed price at which the processed fabric would leave the factory plus his profit. Therefore, the price of the fabric at the point of its leaving the processor's factory is a relevant factory. While computing the deemed price at the processor's factory gate the value of the grey clothes handed over to the processor has necessarily to be taken into consideration. This is clear from the illustration given in the reference order and which was again quoted in the clarificatory order of the Supreme Court. If wastage during the process has to be fixed at 5% it requires 100sq. metre of grey fabrics for removing 95 sq. metre of processed grey fabrics at the factory gate. Admittedly, this aspect has not been taken into consideration by the assessee while adopting the assessable value. On the other hand, it had derived at the assessable value by multiplying the price of processed grey fabrics per metre by the total quantity moving out of the factory after the process. Therefore, I agree with the view taken by the Member (Technical) that what is rel....
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....ac eighty five thousand fourty one only) by not adding the shrinkage factor as below (As detailed in Annexure B). Month July-03 August-03 Total Details of short payment AED Total 4225.57 211127.85 54782.80 273913.98 97.008.00 4,85,041/- BED 168902.28 219131.18 3.88.033.00 The said amount is demandable and recoverable from the assessee under section 11 A of the Central Excise Act, 1941 The interest at the appropriate rate is also chargeable and recoverable from the assessee under section 11 AB of the Central Excise Act, 1944. The assessee is liable for penal action under section 11 AC of the Central Excise Act, 1944. The assessee is also liable for penal action under Rule 25 of Central Excise Rules 2002. མདི སà¾à½– MK ARORAY DEPUTY COMMISSIONER CENTRAL EXCISE VIKHROLI DIVISION MUMBAI-II. Shubhang 2.8.04 निरीकà¥à¤·à¤• के ऊ. शà¥à¤²à¥à¤•, Inspecto. Cenu खंड 11 डि Range Excise il, Vikarou Dvs. Mumbai I Che 3/2/03. rates, S....
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....84.25 43.49 25.00 1057.28 108.73 1002257 309 75 322.76 294.25 28.51 25.00 712.74 71.27 002258 590 75 615 56 576.50 39.06 25.00 976 54 97.65 002259 397.25 413.93 329.00 84.93 25.00 2123.36 212.34 002260 611.75 637.44 585.50 51.94 26.00 1350.53 135.05 002261 408 25 425.401 391.25 34.15 26.00 887.81 88.78 302262 608.25 633.80 586.00 47.80 26.00 1242.71 124.27 1002203 918.50 957.08 880.50 76.58 20.00 1991.00 199.10 002264 205.50 214.13 170.00 44.13 26.00 1147.41 114.74 002265 207 25 215.95 202.00 13.95 26.00 362.82 36.28 002200 002.50 027.81 576.75 51.05 28.00 1429.54 142.95 002267 432.00 450.14 417.25 32.891 28.00 921.03 92.10 002268 430 50 448 58 414.50 34.08 28.00 954.27 95.43 002269 436.50 454.831 414.25 40.58 28.00 1136.32 113.63 002270 435.00 453.27 423.50 29.77 28.00 833.56 83.36 002271 436.50 454.83 417.00 002272 405.50 422.53 391.25 37.83 28.00 ....
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....s in the case of Ujagar Prints and Pawan Biscuits clearly indicated that job work was to be valued by adding the processing charges (job work charges) to the landed cost of the raw materials. This is the basic principle, which remains unchanged. There was no specific rule relating to job-work under the old Valuation Rules and there is no specific rule in the new Valuation Rules, 2002, also. The earlier rule which closely approximated the system of valuation decided by the Apex Court was Rule 6(b)(ii) and the rule which closely approximates the same concept now is Rule 6. Once processing charges (job charges) are added to the raw material cost, the question of adding any further amount towards profit (of 15%) under Rule 8 does not arise as job charges always include the job worker's element of profit also. In other words, after 1.7.2000, in respect of goods manufactured on job work basis, valuation would be governed by Rule 11 of the New Valuation Rules, 2002 read with Rule 6 read with the above two decisions of the Apex Court. 5. As regards, determination of 'shrinkage factor' in respect of processed fabrics the same has to be taken into consi....